Gerald Kampanikiza, News Reporter
BLANTYRE – The Reserve Bank of Malawi has announced a 25 percent devaluation of the Malawi Kwacha effective May 27th, 2022 to align to around the market clearing level.
In a statement released by the bank dated May 26th, 2022 and signed by it’s Governor Dr. Wilson Banda, the Bank is aware that an exchange rate path cannot be predicted or determined without considering prevailing market factors.
It further said the bank is aware that speculation can lead to excessive volatility in the foreign exchange market as such, the Bank has put in place measures that will be taken going forward which include; allowing the exchange rate to adjust to a market clearing position with the view of endorsing a flexible exchange rate.
To add on that the statement said that the Bank will aim to become a net buyer of foreign exchange in the market in order to increase official foreign reserves and that the surrender requirements of both tobacco and export proceeds will remain in place for the short term untill the foreign exchange market stabilizes.
“In the short term, the Kwacha exchange rate adjustment process may add pressure on inflation but we are committed to prudent monetary and fiscal policies in order to contain all inflationary pressure within manageable limits,” Dr Banda said.
He further said that prices in the shops already leflect to a large extent, aligning the ADB’s TT rate with the Bureaux Cash Rate should not lead to further price increases.
The Bank has confidence in the ability of ADBs to responsibly manage the exchange rate to avoid excessive volatility in the market,” he explained.